Singapore’s retail sector has been subdued since Q4 2011 when retail rents peaked; just as the famed integrated resorts were freshly completed, tourists from China came in droves and suburban malls flourished as they began to showcase similar offerings as those in the prime district of Orchard Road.
However, towards end-2013, the narrative changed. Consumers began migrating online, as they sought better value and lower prices for merchandise.
Coupled with the boom in low-cost carriers and a strong Singapore dollar, shopping demand was pushed farther afield to the overseas market, as consumers found a wider array of goods that were unique in style and offered at better value.
Even so, retail rents continued to be under pressure, as higher operating costs and a more competitive retail landscape contributed to the thinning margins of retailers. Over the years, this has led to several international retailers, including GAP, Banana Republic, New Look, Lowrys Farm and Carrefour exiting the Singapore market. In Q2 2018, overall islandwide prime retail rents eased by 0.5 per cent year-on-year, with rents in Orchard Road dipping by 1.5 per cent y-o-y.
E-commerce: Online-to-offline synergy
While the traditional brick-and-mortar retail landscape has been challenging, the e-tailing landscape is reaching its point of saturation. Besides diversifying into other verticals, several e-commerce platforms have conversely moved to physical stores, as in the case of online giants Amazon and Alibaba. Amazon not only launched physical marketplace Amazon Go to the public earlier this year, but also acquired American supermarket chain Whole Foods Market in 2017.
In China, Alibaba expanded its physical retail footprint by acquiring a 15 per cent stake in Beijing Easyhome Furnishing for RMB 5.6 billion (S$1.12 billion). China’s second-largest home-improvement supplies and furniture chain, Beijing Easyhome operates 223 physical stores across 29 provinces (as at end-2017).
Back in Singapore, Alibaba tied up with Singapore Post to provide last-mile delivery services to consumers, investing S$86.2 million for a 34 per cent stake in SingPost’s logistics subsidiary and increasing its investment in Singapore Post from 10.2 per cent to 14.4 per cent in 2017, to the tune of S$187.1 million. Online retailers in Singapore are also moving into malls, as in the case of Naiise, Reebonz, Love Bonito and Ohvola.
Repurposing mall spaces
To remain competitive, retailers and landlords must now go the extra mile, repurposing mall spaces and improving the customer experience to increase footfall and customer stays. For landlords, this includes rethinking uses and cross-concept collaboration to reinvent retail spaces, such as in the United States where retail malls are seeing an increasing need to transform vacated units due to store closures.
Over in St Louis, a once empty space in Chesterfield Mall became the Children’s Illustrated Art Museum, providing hands-on experiences that centre on the work of children’s book artists and illustrators. Community spaces such as these are not foreign to Singapore, manifested in the form of libraries within malls and the integration of malls into civic and cultural zones, such as The Star Vista, which also houses a 5,000-seat performing arts centre.
Hybrid concepts and personalising shopping experience
With the need to reach out to the millennials, retailers have also moved towards the adoption of lifestyle concepts to strike a stronger chord with younger audiences.
Canadian clothing retailer Frank And Oak for example, offers personal-shopper services via one-on-one appointments with their in-house Style Advisers, who will guide customers through everything the brand has to offer – from suits to styling. While contemplating whether they should part with their hard-earned dollars, shoppers can hop over for a trim at the hairdresser or sip a cuppa at the cafe, both of which are conveniently located on-site. Such cross-concept, lifestyle collaborations are gaining traction around the globe, with even fitness label Bandier set to open a 27,500 sq ft flagship store this year in NoHo, Manhattan, that will house a retail store, fitness studio and health-focused cafe.
Individualised creations and bespoke pieces have also found their place in the Singapore market, offering consumers opportunities for a personalised luxe brand expression of themselves. For instance, Louis Vuitton offers made-to-measure services, where customers can select between six shapes for a bespoke bag, customise a pair of shoes or even drop their initials on the brand’s emblematic trunk.
Local retailers have joined the bandwagon, with indie brand Bynd Artisan collaborating with artistic talents to offer clients personalised paper and leather accessories. Those looking for more hands-on experiences can even try their hand at creating their very own leather products at workshops held by the brand.
Harnessing tech: Big Data analytics, AI and AR
With technology making waves, it has been rapidly leveraged to provide transformative, curated experiences to engage consumers. In an era where websites are a given, traditional retailers are seeking alternative modes to enter new markets. Starbucks embarked on a strategic partnership with e-commerce titan Alibaba to deliver the “Starbucks Experience” to Chinese consumers any time, anywhere – tapping extensive consumer analytics gleaned from Alibaba’s Hema supermarkets to further penetrate and better serve communities. Major retailers have also upped their game by improving in-house technology capabilities.
L’Oreal, for instance, brought its advertising-tech stack in-house and developed a tool, Cockpit, to measure the return of investment and productivity of digital media investments.
Earlier this year, the beauty conglomerate also acquired ModiFace, an augmented reality (AR) and artificial intelligence (AI) entity, which has lent many businesses a hand in incorporating AR features into several beauty brand apps. Retailers have had to become unlikely bedfellows with technology as more companies employ AI to empower work processes.
Pop-up stores: E-retailing to mainstream
Other than providing consumers a more seamless experience, retailers have also extended their reach to new market segments by introducing pop-up stores. Pop-up stores were widely adopted by new e-tailers to engage consumers who were unfamiliar with e-commerce platforms. However, it has also turned into a platform for established luxury brands to reach new markets.
Chanel opened the doors to its pop-up store at Marina Bay Sands in 2017, with luxury players Miu Miu, Fendi, and Chloe quickly following suit.
In contrast, fast fashion brands such as Zara and Uniqlo have treaded in the opposite direction, closing smaller stores to streamline and focus more on their flagship stores.
Ecosystem: Startups in a mall
More recently, mall landlords and retailers have begun exploring ways to create an ecosystem to build and develop new retail entrants.
Co-working spaces have begun operating in malls, creating opportunities for mutual benefit between the new wave of retail startups and existing traditional retailers.
In Singapore’s Marina Square, JustCo occupies 60,000 sq ft of retail space, and features a product showcase area for members to display their products at zero cost.
In neighbouring Indonesia, co-working player Cre8 has also chosen a mall in North Jakarta for its new working space.
Moving forward, the retail sector is likely to evolve further as stakeholders change the game by relooking static aspects, such as the look and feel of the physical shop and its products, and personal aspects – the interaction of its staff with shoppers.
Technology will sit at the core of this evolution, as it becomes increasingly utilised to understand consumer behaviour and propel more personalised experiences.
By Wendy Low – executive director and head of retail; and Lee Nai Jia – senior director and head of research at Knight Frank Singapore.